Gambling on Growth

The $787 billion federal stimulus plan is a gamble. President Obama admitted as much when he signed the bill Tuesday, saying, “The road to recovery will not be straight. We will make progress, and there may be some slippage along the way.” But a far greater gamble would have been to watch the economy teeter on the edge of the abyss and not act.

Gambling also figures into the politics surrounding this huge investment. Republicans in the House of Representatives, who voted in a bloc against the bill, may be betting the economy does not recover sufficiently by November 2010 when they face re-election. It’s probably a safe bet, based on the projections economists are making about how steep and long this recession will be. But if they publicly base their opposition to the stimulus on its staggering price tag alone, House Republicans may be accused of hypocrisy when they inevitably suggest budget-busting tax cuts and defense spending hikes.

Republican Sen. Olympia Snowe, who along with fellow Republicans Sen. Susan Collins and Pennsylvania Sen. Arlen Specter voted for the stimulus plan, believes the bill will help turn the tide on the economy. Months ago, Sen. Snowe was advocating a second stimulus package to supplement the Troubled Asset Recovery Program. The president has echoed this thinking, calling the TARP and the stimulus legs of a multileg stool. His housing initiative, and structured aid for the auto industry, are more legs on that stool.

With the consensus that this economic crisis is the worst since the Great Depression, history books are being dusted off. One side of the stimulus debate suggests that as much as $3 trillion is needed to make an impact on the foundering economy. On the other side, some say President Franklin Roosevelt’s national recovery programs — spending of an order similar to the Obama stimulus — did not actually work. Those critics assert that it was the huge spending that fighting World War II demanded which finally lifted the nation out of the doldrums.

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If WWII worked for the economy, one pundit wryly noted, then perhaps the government could again build tanks, even if they end up rusting in a warehouse. The Obama plan, though not perfect, and though still a gamble, at least succeeds in giving the nation tangible improvements for its investment.

The choice the nation faces is like that of a small business that is moderately successful making portable radios. Each year, revenues decline with fewer sales, so the owners decide to gamble and borrow money to retool so the company can now manufacture MP3 players. It may work in a big way, or it may fail, but continuing to plug away in a declining market is a dead end.

We expect all our elected officials to be bullish on the economy. There are some issues that are neither red nor blue, and betting on recovery is one of them.